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United Kingdom: Three questions about Brexit

6/11/2019

The deadline for Brexit has been extended to 31 October. However, it is far from certain that this delay will be for any help in getting out of the impasse.

TRANSCRIPT // United Kingdom: Three questions about Brexit : June 2019

THREE QUESTIONS

François Doux: Will 2019 be the year of Brexit? The deadline keeps changing, from 31 March to 12 April and now 31 October. Jean-Luc Proutat, hello.

Jean-Luc Proutat: Hello François.

François Doux: A priori, 31 October is the new deadline by which the UK must leave the European Union. My first question: the situation seems to be deadlocked. Why?

Jean-Luc Proutat: It’s an inextricable situation. Over the course of 45 years of communal living, the UK and the European Union have built up very close links, which go far beyond a simple free trade agreement.

Take Airbus, for example. The UK is a key part of the supply chain, furnishing the wings, electrical circuits, engines, etc. Directly or through British suppliers, Airbus sustains a hundred thousand jobs in the UK. Once the UK is outside of the EU, the situation risks becoming much more complicated.

François Doux: Why?

Jean-Luc Proutat: Simply because the European Union pools together all of its legal, technical and regulatory standards, which makes trade extremely secure. The EU also guarantees the free circulation of labour, which is very important for an integrated sector such as aeronautics. There are numerous other examples in the mechanical engineering industry, agro-food, etc.

The International Monetary Fund has described Brexit as “self-mutilation”. So we can understand why the UK parliament keeps hesitating when it comes time to sever ties.

François Doux: This brings us to my second question: what are the political leaders going to do? This edition was recorded before we had the results of the European elections, but we have seen the polls.

Could this new situation change things?

Jean-Luc Proutat: I’m afraid not. According to the polls, the country is divided into three parts. About a third of voters support a hard Brexit. On the opposite side, a third of voters vote for pro-EU parties like the Liberal Democrats, the Greens or the SNP, for example. Between the two, the final third hesitates a bit, in a mirror image of the moderate conservatives and Labour leaders.

Given this political landscape, it will be very difficult to make the least decision. We also know that Prime Minister Theresa May is preparing to resign. She must be replaced by another member of the Conservative party. Early elections cannot be ruled out though, nor another Brexit referendum. All of this will keep UK politicians busy in the weeks and months ahead. Reaching a withdrawal agreement is likely to become secondary. Consequently, come 31 October, we are likely to be in more or less the same position as we are today.

François Doux: My third and last question: with this interminable uncertainty, how is the UK economy faring?

Jean-Luc Proutat: Growth is undoubtedly slowing, although activity rebounded slightly in first quarter 2019, as the British began stockpiling intensively in preparation for Brexit. But the underlying trends are not as strong. Brexit seems to be acting a bit like a slow poison. For example, foreign direct investment net flows are drying up and are near zero. Immigration from the EU have slowed sharply too. The housing market has landed. There is little reason to believe that these trends will reverse themselves in the months and quarters ahead.

François Doux: More subjects to monitor together. Jean-Luc Proutat, thank you.Tune in again next month for a new edition of EcoTV.

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